Groupon’s Stock Plunge Has Yet to Bring a Deal: Chart of the Day

Aug. 30 (Bloomberg) -- Groupon Inc. has yet to become a
bargain stock even after 12 straight days without a gain,
according to a valuation by Aswath Damodaran, a finance
professor at New York University.

The CHART OF THE DAY illustrates the performance of
Groupon’s shares since the largest daily-deal website went
public in November. Yesterday’s close of $4.31 was 78 percent
lower than its initial public offering price of $20. The drop is
the biggest among U.S. IPOs completed during the past 12 months,
according to data compiled by Bloomberg.

Damodaran, who has written four books about valuing
investments, says Groupon is worth $4.07 a share in a blog
posting on Aug. 24. He had originally valued the Chicago-based
company at $14.62 a share.

“It is clear that I underestimated how quickly any
competitive advantages that Groupon’s first-mover status gave
them would be eroded,” he wrote, referring to its relatively
early entry into the online-coupon business. “It is difficult
to see what the company can do to set itself apart from the
competition and make money at the same time.”

Shares of Groupon had their most recent gain on Aug. 13,
and have fallen 43 percent since then. The retreat began after
the company posted second-quarter sales that trailed analysts’
average estimate in a Bloomberg survey.

Whether Groupon’s business is “scalable, defensible and
valuable” has been called into question, Damodaran wrote. The
criteria refer to the company’s ability to expand and to fend
off rivals, along with the value of its operations.